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Bank of America dismisses Chapter 13 bankruptcy trustee suit

Accusations that a Tennessee Chapter 13 bankruptcy trustee did not disperse funds correctly have been dropped by Bank of America. The Bank also agreed to pay the trustee's attorney's fees incurred in the lawsuit. Bank of America worked out a deal with the debtors themselves who were involved in certain Chapter 13 cases and dismissed all claims against the trustee managing the bankruptcies.

Bank of America's argument in the case against the trustee was that as a creditor, it should not have to file a claim or provide documentation showing that Bank of America owned the mortgage in a debtor's bankruptcy proceedings. The trustee maintained that since people who file for Chapter 13 are required to provide a number of documents, including tax returns, and must meet with creditors and debt counselors in order to file for bankruptcy, then a creditor who is initiating a foreclosure proceeding against their home should be required to provide documentation as well. This argument is often referred to as "show me the note" when used in court.

For consumers facing financial challenges like the debtors in the Bank of America case, Chapter 13 bankruptcy is often the best solution for getting back on their feet. Filing for Chapter 13 provides the consumer with an opportunity to make manageable payments on their debts without completely excusing the debt or liquidating assets as in a Chapter 7 bankruptcy. The trustee in a Chapter 13 case is appointed to accept and disburse the payments that are made by the debtor, which are set up to pay off all debt in a certain time frame, which is usually a period of up to 5 years.

Families may find themselves in financial difficulty because of the loss of a job or medical bills. Sometimes, they might feel like they have to choose between caring for their family and paying off debts. Chapter 13 may afford a viable solution for people in need of debt relief who are still able to make payments to their creditors, but want a fresh start, financially.

Source: Nashville Business Journal, Bank of America Drops Case Against Tennessee Trustee, Annie Johnson, Aug. 16, 2012

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